Microsoft faces massive fines from European competition authorities after it
failed to offer millions of Windows users a choice of web browser.

The firm admitted it had “fallen short” of its obligations under a 2009 antitrust settlement which compel it to offer PC owners the opportunity to choose software from rivals such as Google and Mozilla as their main web browser.

Competition Commissioner Joaquin Almunia said it appeared that 28 million Windows 7 users had not been shown a “browser ballot” of a dozen options, and warned of “severe consequences” if a breach of the rules is confirmed by a formal investigation. He noted that Microsoft “seems to acknowledge the facts”.

Microsoft said it had failed to provide the choice of browsers, other than its own, Internet Explorer, because of a “technical error” built into “service pack 1”, the first major update to Windows 7, introduced in 2010.

“The Commission recently told us that it had received reports that the BCS [Browser Choice Screen] was not being displayed on some PCs. Upon investigating the matter, we learned of the error,” a Microsoft spokesman said.

“The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista.

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“However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we’ve missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1.”

Microsoft was forced to offer a choice of browser after a 10-year battle with European competition regulators who accused it of abusing its dominance of the operating system market to damage rivals.

The case was originally triggered by a complaint by Sun Microsystems in 1998 that Microsoft would not share technical information to make Windows machines compatible with Sun computers. Officials later investigated the way Microsoft bundled its Media Player and Internet Explorer software with Windows, leading to a legally-binding settlement that included the browser ballot obligations.

At the time of the settlement, Internet Explorer was the dominant desktop web browser, with more than 55 per cent of global market share, according to StatCounter, a firm which tracks the popularity of web browsers.

This year, however, it was overtaken by Google Chrome, which was introduced in 2008 and has been heavily promoted on the Google home page. Google is now in talks with European regulators over alleged abuse of its dominance of the web search engine market.

Microsoft said it would distribute an update to offer a browser choice to Windows PCs that missed out by the end of this week. It also offered to extend the settlement with antitrust officials by 15 months.

The European Commission has powers, however, to issue fines of up to 10 per cent of Microsoft’s annual revenues, which were almost $70bn in 2011. In 2008 it levied a penalty of 899 euros on the firm for failing to meet its obligation to share Windows compatibility information with rivals.

“I consider that commitments by companies themselves are a good way to solve competition problems... as an alternative to lengthy proceedings," said Mr Almunia. “But this can only work if companies implement these decisions fully."